Canada's 1%

Doug Saunders has written an interesting column on what he calls the most ghettoized community in Canada:

My colleague Tom Cardoso and I recently published a set of interactive maps of Canada, drawing on a huge new database assembled by economist Miles Corak, which charts the country’s districts by their level of income mobility – the chances that people born in one circumstance will end up living in a better or sometimes worse, income level. What stood out, visually, were the patches where intergenerational poverty is the norm – places where people born poor are likely to stay poor. Such places are big, but have very small populations. Even more accentuated, if you can zoom in closely enough to see them, are the ghettos of the wealthy. They are more persistent, and more closed, than anything on the low end of the scale.

We give a lot of lip service to the middle class. But the reality is pretty stark -- and it's been stark for quite awhile:

Middle-income Canadians (who have individual salaries roughly in the $40,000-to-$70,000 range) have about an even chance of seeing their children slide down or up the income scale – it is hard to predict how the kids will turn out, and that anxiety is central to the middle-class experience. Low-income Canadians (earning $23,000 or less) are somewhat more likely to see their kids stay in poverty. But the top 1 per cent really stand out: They are subject to what Dr. Corak calls the “intergenerational cycle of privilege” – they have a greater chance than any other Canadian group, better than 50 per cent (and probably much higher), of seeing their kids end up in the same income category.

We know this group is also becoming more segregated geographically: Studies by urban geographers such as David Hulchanski and David F. Ley have shown that Toronto and Vancouver are becoming dramatically more segregated by income, with the very wealthy living more than ever in isolated residential enclaves.

Fifty-two years ago, sociologist John Porter demonstrated, in his bestseller The Vertical Mosaic, that Canada’s economy, its politics and its culture were controlled by a cloistered elite from the same schools and neighbourhoods, and only 3 per cent of Canadians had any access to this circle. Social mobility has improved dramatically thanks to half a century of immigration, growth and better social policies. But the top ranks remain closed and self-protective.

Saunders writes that there are two ways Canada's one per cent protect their privileged position:

The first is Canada’s lack of an inheritance tax. Estates (including houses) are taxed as income upon their owner’s death, then can be passed on to children – removing incentives to put that wealth to better and more productive use. As a result, the higher rungs on the ladder are less open to people who have developed creative, profitable companies and ideas, and more so to people who have simply had the right parents. Taxing inheritance heavily doesn’t generate much government revenue; it just makes people look outside their own families for places to put their money to work. It expands privilege rather than keeping it cloistered.

The second is Canada’s lax policy on private schools. The 6 per cent of Canadians who attend fee-charging schools are overwhelmingly there because their families are wealthy (studies show that their advantages are entirely found in their connections, not in their academic performance). Such schools are not required to admit a large percentage of lower-income students, even though their fees and sometimes their operations are taxpayer-subsidized.

Food for thought -- and debate.

Image: The National Post